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SAP meets the new enterprise software zeitgeist

 

July 13, 2016

Another Analyst Firm Calls Out SAP on ‘run simple’ Myth

Traditional proprietary enterprise software is tired. So tired that the Gartner Group calls it “legacy“. And, there’s no amount of marketing efforts that can overcome this tough reality. SAP has attempted to obscure challenges in adapting to the new reality of adaptable systems and cloud computing with the “run simple” positioning that exposes their failings. A study [pdf download, no registration] published by Nucleus Research is a condemnation: “SAP’s new marketing tagline – run simple – is not only grammatically incorrect, it’s grossly inaccurate.”

The report titled “6 Out of 10 Customers Wouldn’t Buy SAP Again” makes for fascinating reading. Some of the analysis from 40 SAP customers, including many reference customers, and 200 potential customer evaluations, is damning. Some may think that the sample size is too small. Or, that Nucleus has gone sensational. The point is that this is yet another sign of the major shifts in the enterprise software market. And, Nucleus is well-known for effective analysis of the ROI for enterprise software.

Nucleus “found overall confusion about product direction, concerns about the disruption and risk posed by moving from existing legacy applications, and a history of challenges with actually making the software work, all of which continued to negatively impact customers’ abilities to get value from SAP.”

The new enterprise software zeitgeist is: adaptable, easily cloud deployable, intuitive and open.

What About S/4HANA?

The Nucleus study found that “for SAP’s core ERP market, 9 out of 10 customers indicated they would not consider a future investment in S/4HANA and appear to be following a slow tapering-off strategy as they evaluate other opportunities in the market.” S/4HANA is a clever use of in-memory database technology to accelerate processing and eliminate the need for aggregate tables for analytics. What is very clear is that S/4HANA:

  • Is a rewrite that isn’t ready for any sophisticated organization
  • Requires significant effort to upgrade from highly custom legacy systems
  • Increases customer lock-in beyond the application and proprietary language to middleware, database and hardware
  • Uses technology that can be replicated by open source
  • Accelerates many functions that do not need to be accelerated

It’s no wonder this significant technology change with associated high risk has become a compelling event for current SAP customers to consider alternatives.

Implications in the Government Market

From time to time FreeBalance has competed against SAP resellers in the government market. We’ve met many SAP customers who have expressed similar reservations about the software firm as reported by Nucleus. One customer went so far as to tell me that they had been “sapped”. Mind you, I have met one customer who expressed positive sentiments and few others that were OK with the decision. But, the vast majority have been negative. More specifically: the vast majority of users and public financial management experts have been negative. IT folks have been more positive.

We tended to chalk up the dissatisfaction with SAP as an outlier because of the government market. Software originally designed for the private sector has been known to have problems dealing with government legal frameworks and reform programs. Yet, there is increasing evidence of dissatisfaction across many vertical markets. For example, SAP implementations have been attributed as partly to blame for Target exiting the Canadian retail market and major problems at Sobeys acqusition of Safeway stores in Canada.

The study gives SAP a “D” rating overall, with a “C” in ERP and Analytics and “Ds” and an “F” in the other categories. Governments need unified and integrated systems. An OK financial management system with poor procurement and human capital does not ensure that controls are fully automated and that decision-makers get the information that they need. What’s the point of trying to integrate a core SAP system with families of “best-of-breed” applications, as many governments have done? There are at least two national governments who don’t use SAP for budget controls. There’s others that use SAP for line-item budget control because they were told that it was a “best practice”. SAP implementations in government have gone hundreds of millions of dollars over budget. One U.S. military implementation was considered a waste of a billion dollars.

Governments that have standardized on SAP should consider mounting technical debt and reliance on proprietary legacy systems. It’s time to consider more adaptable systems. And, it’s time to consider cloud implementations.

Governments looking at acquiring new financial management systems should understand requirements and the reform agenda. The notion that governments need something called “ERP” that uses “best practices” designed in the private sector is not relevant.

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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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